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Merrill Lynch Top Internet Stocks to Buy for 2014

The Internet is growing every year, and the amount of time and usage of it is growing exponentially. The rapid growth in smartphones and tablet adoption as a competitive platform with the personal computer has driven mobile time share to more than 50% of total time. The Internet analysts at Bank of America Merrill Lynch expect mobile usage to grow more than 50% in 2014, with much of this incremental to the sector. The mobile uplift may start to wane in 2015, but should still remain strong.

With huge trends like e-commerce and social media dominating the Internet growth sphere, one thing has become acutely obvious. The companies that do not stay actively engaged in this huge growth pattern will lose business and market share to those that do. The Merrill Lynch team has a new research report that focuses on the stocks that are laser focused on the top Internet growth areas. Here are their top Internet stocks to buy for 2014.

Amazon.com Inc. (AMZN) is a top stock to buy and also has the growth style favored at Merrill Lynch. Most Wall Street analysts view Amazon as the innovation leader and a top stock to own for 2014 and beyond. In addition to its online retailing muscle, the company has a gigantic cloud storage business that continues to dominate rivals. The Merrill Lynch price target for the Internet retailing giant is $445. The Thomson/First Call consensus estimate is $412. Amazon closed Wednesday at $401.92.

AOL Inc. (AOL) continues to add new services and content to stem losses in subscribers. The company also has an outstanding track record of returning cash to shareholders. The UBS price target for the stock is $49. The consensus estimate is $47. AOL closed Wednesday at $45.97.

eBay Inc. (EBAY) may provide investors the best risk-reward profile in the Merrill Lynch coverage universe, given lower expectations, improved e-commerce trends and the fact the stock has underperformed this year. The analysts also believe eBay benefited from heavy promotions, seller incentives, scarcity of key items at other online and offline retailers and large PayPal mobile volumes. The Merrill Lynch price target for the stock is $64 and may be poised to go higher. The consensus target is just over $62. eBay closed Wednesday at $52.37.

Expedia Inc. (EXPE) has absolutely exploded price-wise over the past year, and more gains are expected. The company provides travel products and services to leisure and corporate travelers, offline retail travel agents and travel service providers through a portfolio of brands, including Expedia.com, Hotels.com, Hotwire.com, Expedia Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia, Expedia CruiseShipCenters, eLong and Venere.com. Investors are paid a 0.9% dividend. The Merrill Lynch price target is posted at $75. The consensus price target for the stock is $64. But Expedia closed Wednesday at $70.31.

Facebook Inc. (FB) had an outstanding year in 2013, and it may be poised to do even better in 2014. The rapid increase of mobile advertising sales has put a strong wind at the company’s back. Plus the company has no viable challenger to threaten its 1.1 billion captive user base. The Merrill Lynch target is at $64. The consensus price target for the social media giant is $60. Facebook closed Wednesday at $58.23.

Google Inc. (GOOG) continues to be the undisputed Internet leader, and it is also a member of the Merrill Lynch list of top stocks to buy. The company is preparing a roll-out of its ultra-fast Google Fiber content and Internet product in Austin, Texas, over the course of 2014. With super-fast speeds and lower content pricing, it could one day also dominate that field. The Merrill Lynch price target for the stock is $1,250, and the consensus target is posted at $1,150. Google closed Wednesday at $1,141.23.

Pandora Media Inc. (NYSE: P) has dominated Internet radio and it is now making a tremendous push to be a standard item in new cars. At the recent Consumer Electronics Show in Las Vegas Pandora unveiled its monetization strategy for in-car systems. The company plans to introduce 15-second and 30-second audio advertisements while reducing ad frequency, as compared to its other platforms such as desktop, smartphone and tablet. The Merrill Lynch price target for the stock is $35, but the consensus figure is lower at less than $30. Pandora closed Wednesday at $32.70.

Priceline.com Inc. (PCLN) continues to dominate the travel industry online. The company was added to the Goldman Sachs Conviction Buy List back in November, and the Wall Street firm posted an astounding $1,500 price target for the stock. The Merrill Lynch price target is $1,300. The consensus price objective is placed at $1,215. Priceline closed Wednesday at $1157.50.

Shutterfly Inc. (SFLY) has secured a quality niche in the Internet landscape for photos. The Merrill Lynch analysts cited the firm’s positive thesis, citing growth opportunities, its e-commerce model, quality products and culture of innovation. The Merrill Lynch price target for the stock is set at $64, while the consensus number stands at $61. Shutterfly closed Wednesday at $47.63.

TripAdvisor Inc. (TRIP) is looking to make the mobile booking experience the easiest in the travel industry. The company launched apps for Android and iOS in early October that help eliminate pop-up windows that crowd the app for each advertiser link. The Merrill Lynch price target for the stock is $90, and the consensus price target for this top travel competitor is $80. The stock closed Wednesday at $85.15.

Yahoo! Inc. (YHOO) has more than doubled in price over the past year, and the Merrill Lynch team says more gains are in store. The stakes in Yahoo! Japan and Alibaba are expected to prove to be huge for investors. Alibaba is expected to be the hot Internet IPO this year. The Merrill Lynch analysts also expect cash to be returned to shareholders in a variety of fashions over the coming years. The Merrill Lynch price target for the stock is $44. The consensus target is much lower at $38.60 as of now. Yahoo! closed Wednesday at $41.01.

Mobile usage growth and monetization remains the top Internet investment theme, with mobile minutes up more than 75% in 2013 and U.S. mobile usage now at 54% of total usage (as a percentage of total minutes, per comScore). The Merrill Lynch team believes companies with growing mobile usage or higher mobile market share than on PC as best positioned to have upside surprises in the next 12 months. Their top stock to buy are dominate Internet names, the kind that work well for most portfolios.